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Saving For a Space Ship

Trapped In A Shared Ownership In Oxford Despite Having Made Money Via Hpi

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Wants to sell 25% share in Oxford & retire in dorset, but due to hpi, cannot afford to buy a 25% share in dorset.

Radio 4 You and Yours

http://www.bbc.co.uk/programmes/b06301g8

re-listen now available

starts 15.3 mins in

Prog Started Time 12:15am - End Time 12:57am

Edited by Saving For a Space Ship

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It is a shame that people didn't realise that the shared ownership scheme helped to over inflate the prices.

I think they do, but people seem to have a view that they are the centre of the universe. As if an uplift in value benefits only them.

Relative of mine was raving about how his (miniscule starter home) has gained value. I remonstrated with him that thats nice, but unless he wants to be stuck in a 500sq ft shoebox for the rest of his life (he doesnt, he wants to start a family) then the 10-20k he thinks he's 'gained' will actually cost him 20-40k because thats the increase in the next 'rung up the ladder' He didnt seem to see it that way and just said, 'no, i've made money'

Fast foward six months and he's complaining about how he cant afford a decent sized home because prices have gone up and how he's getting fed up with his cramped starter home.

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If I understand the figures correctly, she bought 25% of a £57,500 house in 1997 and now has £1k outstanding on the mortgage i.e. she has paid down £13,375 in deposit and mortgage principal in the last 18 years. And she's surprised she can't now buy a property outright in the SW of England?

If she wanted to have some wealth in retirement maybe she should have saved more of her income during her working life. Just a thought.

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If I understand the figures correctly, she bought 25% of a £57,500 house in 1997 and now has £1k outstanding on the mortgage i.e. she has paid down £13,375 in deposit and mortgage principal in the last 18 years. And she's surprised she can't now buy a property outright in the SW of England?

If she wanted to have some wealth in retirement maybe she should have saved more of her income during her working life. Just a thought.

Who buys a 25% share of a 57k house anyway?!

Is it some kind of housing benefit ruse? The 500 quid a month would only get a shit hole, but 500 quid would pay for a decent share ownership place?

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Interestingly if the deposit isn't held within a recognized deposit protection scheme then the landlord does not have the right to retain any of your deposit on completion of the tenancy.

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I think they do, but people seem to have a view that they are the centre of the universe. As if an uplift in value benefits only them.

Relative of mine was raving about how his (miniscule starter home) has gained value. I remonstrated with him that thats nice, but unless he wants to be stuck in a 500sq ft shoebox for the rest of his life (he doesnt, he wants to start a family) then the 10-20k he thinks he's 'gained' will actually cost him 20-40k because thats the increase in the next 'rung up the ladder' He didnt seem to see it that way and just said, 'no, i've made money'

Fast foward six months and he's complaining about how he cant afford a decent sized home because prices have gone up and how he's getting fed up with his cramped starter home.

I was in a similar situation when I traded up. Everyone told me how lucky I was that prices had risen even when I showed them that I had lost £34k on house prices moving so much (that was an approximation).

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I always use the simple example below when trying to explain this to people. (Removing any capital paid off to keep it simple)

50k - 1 bed flat

100k - 2 bed flat.

5 years later...

100k - 1 bed flat

200k - 2 bed flat

Now want to 'move up the ladder' - woohoo you have 'made' 50k.

So put that towards the now 200k flat and what do you have ?

A debt of 150k rather than 100k if prices had stayed the same.

In simple terms - people think they have 'made' 50k when in fact they have 'lost' 50k.

Some folks eyes do light up upon hearing this and a lightbulb goes on. Some however just still cannot fathom it.

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shared ownership is a scam

that is the long and short of it

I don't know, it is what it is. You spend 25 years buying 25% of a house, at the end of it you own... 25% of a house. This lady hasn't been scammed, she got exactly what she paid for.

The reason she is screwed is the same reason most younger people are screwed i.e. massive HPI from the mid 1990s onwards making it hard/impossible for ordinary people to one day own 100% of a normal house. It's not shared ownership's fault, though maybe being a shared owner blinded her to the reality of her situation i.e. that by owning less than her lifetime housing requirements she was a big loser from HPI, not a winner. She still sounds a bit confused ("I've made money").

Edited by Dorkins

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I don't know, it is what it is. You spend 25 years buying 25% of a house, at the end of it you own... 25% of a house. This lady hasn't been scammed, she got exactly what she paid for.

The reason she is screwed is the same reason most younger people are screwed i.e. massive HPI from the mid 1990s onwards making it hard/impossible for ordinary people to one day own 100% of a normal house. It's not shared ownership's fault, though maybe being a shared owner blinded her to the reality of her situation i.e. that by owning less than her lifetime housing requirements she was a big loser from HPI, not a winner. She still sounds a bit confused ("I've made money").

it is a scam

as well as spending 25 years buying 25% of a house, you also spend 25 years renting 75% of it

and, of more significance to newer participants in the scam, your 25% is at risk first if prices fall - i.e. you can be wiped out (in equity terms) before the 75% is even touched!

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it is a scam

as well as spending 25 years buying 25% of a house, you also spend 25 years renting 75% of it

and, of more significance to newer participants in the scam, your 25% is at risk first if prices fall - i.e. you can be wiped out (in equity terms) before the 75% is even touched!

Is that definitely true, that the shared owner's equity is the first to go if the resale price of the house dips below the original sale price? Does the shared owner also pick up 100% of any HPI?

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Is that definitely true, that the shared owner's equity is the first to go if the resale price of the house dips below the original sale price? Does the shared owner also pick up 100% of any HPI?

The one my brother was on (that I have inherited) shares any growth or any loss between the two parties. You buy, say, a 50% share, and then get whatever that 50% share is worth on selling - so a shared profit or shared loss.

But some other schemes may differ.

Edited by RentingForever

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Is that definitely true, that the shared owner's equity is the first to go if the resale price of the house dips below the original sale price? Does the shared owner also pick up 100% of any HPI?

not in all of them I am sure, but certainly in some of them

there was stuff in the news about such a scheme from one of the major house builders ending up like this

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This is no different from the general misconception that rising prices is good if you are climbing the 'ladder' (I can't write it without quotes). The next rung may be from shared to full ownership, it may be in other cases from a 1 bed flat to a 3 bed house, it doesn't matter, the imagined gain rarely surpases the extra money needed to attain the next rung. Everybody goes up, everybody comes down, the further down, the cheaper to move up.

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